Ghost Month Highlighter

Ghost Month and Trading: Understanding the Phenomenon

Ghost Month (鬼月) is the seventh month of the lunar calendar in Chinese culture, typically falling between late July and September. During this period, it's believed that the gates of the afterlife open and spirits roam the earth. This deeply rooted cultural belief has significant implications for Asian markets, particularly in regions with large Chinese populations like Taiwan, Hong Kong, Singapore, and mainland China.

Why Markets Often Decline or Stay Flat During Ghost Month:

Reduced Business Activity: Many businesses avoid launching new products, signing major contracts, or making significant investments during this period, believing it brings bad luck.

Property Market Slowdown: Real estate transactions drop significantly as people avoid moving homes or making large purchases. In some markets, property sales can decline by 20-30%.

IPO and M&A Drought: Companies often delay IPOs and merger announcements until after Ghost Month, reducing market catalysts.

Retail Spending Drops: Consumer spending on big-ticket items decreases, though spending on offerings and religious items increases.

Self-Fulfilling Prophecy: Many traders and investors reduce positions or stay on the sidelines, creating lower volumes and increased volatility. This becomes a self-fulfilling prophecy where expectation of poor performance leads to actual underperformance.

Tourism and Entertainment Impact: Travel and entertainment sectors see reduced activity as people avoid unnecessary trips and celebrations.

Historical data shows that Asian equity markets often underperform during Ghost Month, with some studies indicating average returns can be 2-5% lower than other months. However, this also creates opportunities for contrarian investors who buy during the seasonal weakness.

Inspired by @honey_xbt